The unlikely ‘dogs of the Dow’ picks that could howl in 2018

A handful of names in this year's so-called dogs of the Dow collection strike some strategists as buys.

The classic investment strategy works like this: investors ought to buy the 10 Dow stocks carrying the highest dividend yields, and hold on to them for one year. High dividend yields traditionally point to falling prices, thus the "dog" moniker.

This year, the names topping the list are Verizon, IBM, Exxon Mobil, Chevron and Pfizer; Merck, Coca-Cola, Cisco, Procter & Gamble and General Electric finish off the list. Notably, shares of GE have fallen more than 40 percent this year, and its dividend sits at 2.7 percent.

At this juncture, Chevron and Exxon Mobil are attractive picks to David Seaburg of Cowen.

"I'm not saying rotate in massively, but I do think ... you're going to start to see some generalist money flow in there, which could keep those names elevated or actually help them work out. Good dividend, solid cash flow; those are two names that I would probably take a swing at," Seaburg said Tuesday on CNBC's "Trading Nation."

Chevron has risen nearly 3 percent year to date, vastly underperforming the broader market. Meanwhile, Exxon Mobil has fallen 8 percent in the same period.

Procter & Gamble, which boasts a dividend yield of 3 percent, is one attractive "dog," said Matt Maley, equity strategist at Miller Tabak.

"Not only has this been a dog of the Dow this year, but it's been underperforming for two years in a row," Maley said Tuesday on "Trading Nation."

Indeed, while the S&P 500 has climbed nearly 20 percent this year, Procter & Gamble has risen 9 percent.

"On a technical basis, the stock is getting back up to its $194, $195 level. That's kind of its double-top from late 2014 and earlier this year. If that can break above that level, that's going to be very positive on a technical basis," he said.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Sara Eisen

Sara Eisen joined CNBC in December 2013 as a correspondent, focusing on the global consumer. She is co-anchor of the 10AM ET hour of CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET), broadcast from Post 9 at the New York Stock Exchange.

In March 2018, Eisen was named co-anchor of CNBC's "Power Lunch" (M-F, 1PM-3PM ET), which broadcasts from CNBC Global Headquarters in Englewood Cliffs, N.J.

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